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In the late 1970s mysterious paintings started appearing on walls around Zurich: created under the cover of darkness they were the work of an anonymous artist who would become known internationally as the "sprayer of Zurich".

The distinctive stick figures were a form of protest against a dull, conservative banking hub – a city very different from the lively Zurich of today.

The graffiti divided the public, with people split over whether it constituted art or vandalism. Meanwhile, city authorities were distinctly unimpressed, offering a 3,000-franc reward for anyone offering information about the artist's identity.

In 1979, the culprit was finally arrested after he returned to the scene of one of his paintings when he realised he had left his glasses behind. He was unveiled as Harald Naegeli, a Swiss artist who had trained in both Paris and Zurich.

During the subsequent trial, Naegeli fled to Germany, the opening gambit in a legal drama that lasted nearly 40 years and involved everything from an international arrest warrant to public petitions by artists and intellectuals and even an appeal to the European Court of Human Rights.

But the long-running dispute finally ended on Tuesday in highly unusual circumstances when Zurich councillor Filippo Leutenegger and Naegeli appeared together before the media and announced they had found a way to bury the judicial axe.

Under the deal, Naegeli – now an internationally recognised pioneer of street art – has presented Zurich with a painting. In exchange, the city has dropped claims for damages of 9,000 francs related to cleaning costs for the removal of 25 artworks painted by the artist on the city's walls from 2012 to 2013.

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